US Outlook Is BlackBerry a high-end smartphone brand or a low-end one? This is the existential question that Research In Motion, maker of the devices, must resolve, and urgently, if it is not to sink into Palm-like obscurity.
You can set your watch by RIM profit warnings these days. They come round every quarter, alongside each set of disappointing results and an accompanying share-price slump that wipes billions of dollars from the company's value.
So it was again this week, plus another familiar feature of RIM's conference calls with analysts: improbable optimism on the part of the management team. A sales upturn is just around the corner, say the co-chief executives Jim Balsillie and Mike Lazaridis. Devices based on its latest, upgraded operating system, BlackBerry 7, will fly off the shelves over Christmas. Perhaps they will. The latest BlackBerry Bold has received reasonably good reviews. It seems to me to be too late to salvage RIM's first tablet, the PlayBook, even if major flaws such as the lack of integrated email are being fixed in a software upgrade. Unsold PlayBooks are piling up in RIM's warehouses, and the company admitted it will have to slash prices to shift them.
So this is the dilemma. These issues and many more are pushing BlackBerry down the value chain. It is discounting prices. The functionality of its devices falls far short of Apple's iPhone and even Android-powered phones, which have tens of thousands of apps available for them.
The one BlackBerry feature that is well-loved, its instant messenger, appeals mostly to kids who hardly have big budgets.
By contrast, BlackBerry's legacy business as the device beloved of the corporate world is eroding fast. IT departments everywhere are indulging employees' itch to own iPhones, and executives find the functionality of the iPad pretty alluring, too. At the top of the consumer market, BlackBerry has failed to gain any real traction.
So, again, which way will RIM jump: toward the high or the low end? This question is more important than any of the soap opera stuff about whether Mr Lazaridis and Mr Balsillie are fighting and whether the company would be better off with only one of them in charge, or neither.
For RIM, 2011 has been a "lost year", in which product launches have been delayed or botched, and the BlackBerry 7 operating system is merely a stop-gap before a whole new software launch some (unspecified) time next year. For now, the company is betting on this new high-end operating system, QNX, and super-high-speed hardware. Building an ecosystem of third-party developers around QNX would be a hard task, even without the embarrassment of the PlayBook, so far the only device based on the new software.
But jumping to the low-end will be painful, too, since RIM is not currently set up to be a low-cost manufacturer. Margins – already eroding, as we saw in Thursday's results – could collapse.
This is a moment of existential crisis for RIM. You wouldn't know it from listening to management, though, and for investors, there is nothing more worrying that that.
US tells EU: show us your money, now
Like water behind a dam, financial markets will turn a hairline crack into a catastrophic breach with frightening speed and force.
Tim Geithner, the US Treasury Secretary, hardly went to Poland yesterday with a blueprint for ending the eurozone's debt crisis, but he did go with that message, drawn from the US experience. He warned finance ministers of the dangers of "loose talk about dismantling the institutions of the euro" and impressed that governments and central banks "have to take out the catastrophic risks from markets".
President Barack Obama will use the occasion of the United Nation's General Assembly next week to meet European leaders and to press the same points. The US is finding the delay and the fractiousness in Europe increasingly terrifying, and the sniffy public reactions of the finance ministers yesterday – plus the additional delay in clarifying the Greek bailout plan – have only made matters worse.
Half-hearted words about protecting the integrity of the eurozone will not ultimately be enough for the financial markets. Either Germany and other core countries show us the money, or they don't. For now, the consensus is that they will – somehow, eventually. What Mr Geither and President Obama fear is the consequence should that consensus crack, which is why they are urging overwhelming force now. Leveraging up bond purchases by the European Financial Stability Facility with borrowed money is a neat way of magnifying their market impact, and since EFSF bonds would be guaranteed by the fund's contributor nations, these would be eurozone bonds by another (less politically controversial) name.
It was disheartening to count the number of eurozone finance ministers who emerged from yesterday's meeting to, in effect, tell Mr Geithner to butt out.
It was disheartening, too, to see how much time was being spent discussing a transaction tax that might slow down financial markets and discourage speculators from betting on a catastrophic breach in the eurozone.
Mr Geithner is worth listening to. The US experience, in the dark hours that began with the collapse of Lehman Brothers three years ago this week, is that financial crises will only be brought under control when markets finally believe politicians will do whatever it takes to defend their institutions. No ifs, no buts. Fix the dam. Don't blame the water.Reuse content